A housing finance lender based in Rajasthan has come under regulatory scrutiny after an investigation reportedly identified suspected fictitious loan accounts worth around Rs 300–400 crore. According to people familiar with the matter, the suspected accounts could represent nearly one-third of the lender’s reported loan portfolio. The lender had reported assets under management of around Rs 1,076 crore as of June, representing a year-on-year increase of about 35%. The investigation reportedly identified loans recorded as disbursed where the underlying borrowers could not be verified. In several cases, corresponding assets were also reportedly not found. The inquiry is also said to have identified alleged instances of loan evergreening and manipulation of non-performing asset (NPA) records. Sources further alleged that funds shown as disbursed against certain accounts were subsequently routed to entities linked to the promoters. The regulatory authority reportedly classified the exposure as a Red Flagged Account (RFA) and reported the status through the relevant credit-information system. However, an RFA classification does not by itself establish that fraud has occurred. It indicates that warning signals have triggered further investigation under the regulatory framework. The development comes amid increased regulatory attention on smaller housing finance companies following earlier cases involving alleged accounting irregularities, questionable loan disbursements and NPA-related concerns. In one earlier case, a housing finance company's board was superseded by the central bank in January 2025 over governance concerns and defaults on payment obligations. The regulator subsequently initiated steps toward insolvency proceedings. Meanwhile, the lender facing the latest allegations has reportedly denied the claims. In a regulatory filing, the company said it had not received communication regarding red flags on any loan accounts and described the reports as distorted and misleading. It also denied creating fictitious accounts or diverting funds, while acknowledging that a regulatory inspection was underway. The matter remains subject to regulatory examination, and the allegations should not be treated as established findings unless confirmed through the relevant investigation or regulatory process.